Inventory

9 Months Ended

Jul. 31, 2021

Inventory at July 31, 2021 and October 31, 2020 consisted of the following (amounts in thousands):


	July 31, 2021		October 31, 2020
Land controlled for future communities	$	167,038	$	223,525
Land owned for future communities	574,042		1,036,843
Operating communities	7,552,200		6,398,538
	$	8,293,280	$	7,658,906

Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes; communities that were previously offering homes for sale but are temporarily closed due to business conditions or non-availability of improved home sites and that are expected to reopen within 12 months of the end of the fiscal period being reported on; and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.

Communities that were previously offering homes for sale but are temporarily closed due to business conditions, do not have any remaining backlog, and are not expected to reopen within 12 months of the end of the fiscal period being reported on are included in land owned for future communities.

Information regarding the classification, number, and carrying value of these temporarily closed communities, as of the dates indicated, is provided in the table below:


	July 31, 2021		October 31, 2020
Land owned for future communities:
Number of communities	6		10
Carrying value (in thousands)	$	41,787	$	68,064
Operating communities:
Number of communities	1		4
Carrying value (in thousands)	$	6,921	$	32,112

The amounts we have provided for inventory impairment charges and the expensing of costs that we believe not to be recoverable, for the periods indicated, are shown in the table below (amounts in thousands):


	Three months ended July 31,				Nine months ended July 31,
	2021		2020		2021		2020
Land controlled for future communities	$	2,045	$	3,926	$	3,792	$	16,765
Land owned for future communities	11,105		2,764		11,105		4,869
Operating communities	—		—		1,100		300
	$	13,150	$	6,690	$	15,997	$	21,934

See Note 12, “Fair Value Disclosures,” for information regarding the number of operating communities that we tested for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and the fair values of those communities, net of impairment charges.

See Note 14, “Commitments and Contingencies,” for information regarding land purchase commitments.

At July 31, 2021, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were VIEs and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At July 31, 2021, we determined that 280 land purchase contracts, with an aggregate purchase price of $3.32 billion, on which we had made aggregate deposits totaling $270.8 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2020, we determined that 207 land purchase contracts, with an aggregate purchase price of $2.31 billion, on which we had made aggregate deposits totaling $208.7 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts.

Interest incurred, capitalized, and expensed, for the periods indicated, was as follows (amounts in thousands):


	Three months ended July 31,				Nine months ended July 31,
	2021		2020		2021		2020
Interest capitalized, beginning of period	$	295,145	$	324,864	$	297,975	$	311,323
Interest incurred	37,133		41,794		116,447		131,547
Interest expensed to home sales cost of revenues	(49,995)		(40,467)		(127,412)		(111,278)
Interest expensed to land sales and other cost of revenues	(1,064)		(2,820)		(3,482)		(4,124)
Interest expensed in other income – net	—		—		—		(2,440)
Interest reclassified to property, construction and office equipment	(1,034)		—		(1,034)		—
Interest capitalized on investments in unconsolidated entities	(1,078)		(1,013)		(3,403)		(2,790)

Previously capitalized interest on investments in unconsolidated entities transferred to inventory	76		88		92		208
Interest capitalized, end of period	$	279,183	$	322,446	$	279,183	$	322,446

During the three months ended July 31, 2021, we incurred approximately $265,000 of interest related to our interest rate swaps which is included in accumulated other comprehensive loss, and approximately $60,000 was reclassified out of accumulated other comprehensive loss to home sales cost of revenues. During the nine months ended July 31, 2021, we incurred approximately $665,000 of interest related to our interest rate swaps which is included in accumulated other comprehensive loss, and approximately $101,000 was reclassified out of accumulated other comprehensive loss to home sales cost of revenues. No similar amounts were incurred during the three months or nine months ended July 31, 2020.